Annovis Bio, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Annovis is a clinical-stage biopharmaceutical company developing buntanetap for neurodegenerative diseases, including Alzheimer’s disease (AD) and Parkinson’s disease (PD). It reported no product revenue and has not achieved profitability.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $7.79 million | $2.15 million |
| General and administrative expense | $2.18 million | $3.10 million |
| Total operating expenses / operating loss | $9.97 million | $5.25 million |
| Interest income | $233,000 | $20,000 |
| Net loss | $9.74 million | $5.23 million |
| Basic and diluted loss per share | $1.19 | $0.64 |
| Cash used in operating activities | $11.63 million | $3.02 million |
At March 31, 2023, cash and cash equivalents were $16.76 million, versus $28.38 million at December 31, 2022. Total assets were $25.55 million; current liabilities were $5.41 million, comprising accounts payable and accrued expenses. The filing reports no debt. As a pre-revenue company, gross margin is not applicable; it does not report a meaningful operating margin.
Changes and notable items
- R&D expense increased $5.64 million year over year, mainly from higher clinical costs for the Phase 3 PD and Phase 2/3 AD trials. Management expects R&D expense and operating cash use to increase in 2023.
- G&A expense declined $920,000, primarily because stock-based compensation expense fell, partly offset by higher professional fees. Interest income rose with higher interest rates.
- The Q1 2022 comparative figures were restated for errors in the timing and recognition of R&D expenses. Restated Q1 2022 net loss was $5.23 million, $660,150 less than previously reported; operating cash flow was unchanged.
- Subsequent to quarter-end, the company sold 704,000 shares under its ATM agreement for $7.66 million gross proceeds before commissions, then terminated the agreement effective April 9, 2023. On April 7, it also sold 84,453 shares in a private placement to directors and management for approximately $1.06 million.
Outlook, risks, and controls
- Management says existing cash and grant funding are expected to fund operations into Q1 2024, including ongoing AD and PD trials. However, the company states it lacks sufficient capital to fund the next 12 months, has no committed external funding, and needs substantial additional capital. Management concluded substantial doubt exists about the company’s ability to continue as a going concern. Failure to raise capital or reduce expenses could require a reduction in operations.
- The Phase 3 PD trial’s planned two-month interim analysis, based on 132 patients with available baseline and two-month data, led the company to continue the trial as planned. The company remained blinded and reported no safety or efficacy results from the trial in this filing. It expected a separate safety interim analysis in Q2 2023 and an AD trial interim analysis in fall 2023. Final analyses for both ongoing trials were expected in Q1 2024; these are management expectations, not guaranteed outcomes.
- Management described longer-term plans for additional disease-modifying studies and a goal of filing two NDAs by the end of 2026, contingent on clinical and regulatory progress. The filing cautions that trial outcomes, regulatory approval, financing, and commercialization are uncertain.
- Disclosure controls were deemed ineffective because of a material weakness in controls over classification of R&D expenses, associated with the restated 2022 interim statements. Remediation includes enhanced review of CRO/CMO contracts, additional staff, and stronger review procedures; effectiveness had not yet been established.
- No material legal proceedings were pending at March 31, 2023. CRO/CMO contracts include payments for services through termination; maximum aggregate executive severance payments were approximately $1.24 million.
Important facts for investors to verify
- Actual cash runway, grant funding availability, and the timing and terms of any additional financing.
- Enrollment, safety, and efficacy results from the AD and PD trials, including whether anticipated interim and final analysis dates were met.
- Progress and testing results for the internal-control remediation plan, and whether further restatements or control deficiencies arise.
- Share dilution from post-quarter equity sales and any future financing, as well as the company’s cash burn relative to its stated runway.